Question

Marwick's Pianos, Inc. purchases pianos from a large manufacturer for an average cost of $1,498 per unit and then sells them to retail customers for an average price of $2,500 each. The company's selling and administrative costs for a typical month are presented below: Cost Formula costs Selling: Advertising Sales salaries and commissions Delivery of pianos to customers Utilities Depreciation of sales facilities Administrative: Executive salaries Insurance Clerical Depreciation of office equipment 5949 per month 54,782 per month, plus 5% of sales 560 per piano sold 5649 per month 55,866 per month $13,572 per month $710 per month $2,504 per month, plus $44 per piano sold 5999 per month During August, Marwick's Pianos, Inc., sold and delivered 64 planos Required: 1. Prepare a traditional format income statement for August 2. Prepare a contribution format income statement for August. Show costs and revenues on both a tofal and a per unit basis down through contribution margin Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare a traditional format income statement for August. (A "Net operating loss" should be entered as a negative number.)

Answer 1

Answer
1
Traditional Income Statement
Sales		$      160,000	64*2500
Cost of goods sold		$        95,872	64*1498
Gross Margin		$        64,128
Selling and Administrative expenses:
Selling expenses:
Advertising	$             949
Sales salaries and commissions	$        12,782		4782+(160000*5%)
Delivery of pianos	$          3,840		64*60
Utilities	$             649
Depreciation of sales facilities	$          5,066
Total selling expenses	$        23,286
Administrative expenses:
Executive salaries	$        13,572
Insurance	$             710
Clerical	$          5,320		2504+(64*44)
Depreciation of office equipment	$             909
Total Administrative expenses	$        20,511
Total Selling and Administrative expenses		$        43,797
Net operating income		$        20,331
				2
	Total	Per Piano
Contribution format Income Statement
Sales	$      160,000	$          2,500
Variable expenses:
Sales salaries and commissions	$          8,000	$             125
Delivery of pianos	$          3,840	$               60
Clerical	$          2,816	$               44
Cost of goods sold	$        95,872	$          1,498
Total Variable expenses	$      110,528	$          1,727
Contribution margin	$        49,472	$             773
Fixed expenses:
Advertising	$             949
Sales salaries and commissions	$          4,782
Utilities	$             649
Depreciation of office equipment	$             909
Depreciation of sales facilities	$          5,066
Executive salaries	$        13,572
Insurance	$             710
Clerical	$          2,504
Total Fixed expenses	$        29,141
Net operating income	$        20,331

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